- Zillow’s renter demand index rose 19.2% year over year, and the typical U.S. rent reached $1,932 in September, up 2.7% from a year earlier.
- A typical new buyer’s monthly payment hit $3,037, up 5%, and single-family rental demand grew 21.6% against 10.1% for multifamily, per Zillow.
- Demand is strongest in San Jose, San Francisco, Austin, Miami and Phoenix, but only the Bay Area saw fast rent growth because new supply is keeping pace elsewhere.
U.S. rental demand rose 19.2% year over year in September as higher borrowing costs pushed would-be buyers into rentals, according to Zillow’s September rent report.
Zillow put typical rent at $1,932, up 2.7%, while the typical new buyer’s monthly payment rose 5% to $3,037.
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Renting Gains a Cost Edge
Zillow says the gap is widening, with buyer payments rising at almost double the pace of rent. Affording a typical rental takes $77,278 of income, against $121,496 for typical homeownership, a difference above $44,000.
A median household would put 26.3% of its income toward a new rental, little changed in a year, versus 41.3% for a new homeowner.
Single-Family Rentals Lead
Zillow’s demand index shows single-family rental demand up 21.6%, over twice the 10.1% rise for multifamily. Typical single-family rent is $2,266, which Zillow says is $771 below the typical buyer’s monthly cost.
Single-family rents are up 3.1% from a year ago, versus 2.2% for multifamily, whose typical rent is $1,762.
Sun Belt and Bay Area Surge
Zillow reported the biggest demand jumps in San Jose at 82.5% and San Francisco at 66.9%, followed by Austin, Miami and Phoenix at 49.3%, 48.9% and 43%. Bay Area rents followed, with San Francisco up 11.8% and San Jose up 8.3%.
Rents rose far less in the other hot markets, with Austin up 0.7%, Miami 1.8% and Phoenix 1%. Zillow attributes that to new construction keeping supply level with demand.
Demand fell in Louisville, Baltimore, Washington, D.C. and Cleveland.
Concessions and Affordability
Zillow found 39.6% of rentals offered concessions in September, up 2.2 points from a year earlier. Rents rose year over year in 49 of the 50 largest metros, and fell month over month in 16, led by Boston at 0.6%.
Austin (18.1% of income), Raleigh (18.2%) and Salt Lake City (18.3%) are the most affordable large rental markets, Zillow reported. New York (39.7%), Miami (36.6%) and Los Angeles (33.7%) are the least.
Why It Matters
For apartment owners, demand is not the issue in the Sun Belt hot spots. Supply is, since new construction held rent growth near 1% in Austin, Miami and Phoenix despite surging demand. Higher mortgage rates are feeding renter demand, a point CRE Daily made when covering how the rent-buy divide widened. Concessions remain common, with 39.6% of Zillow listings offering them, up 2.2 points from a year ago.
Zillow also found that a $100K income unlocks 77% of rentals, up from 31%.
What’s Next
With forecasts pointing to higher mortgage rates, the rent-versus-buy math should keep favoring renting, so watch how quickly concessions fade in markets such as Austin and Phoenix.
